The Asian Development Bank (ADB) is making a significant move to promote sustainability in India by investing $25 million in a climate bond issued by Vivriti Capital Limited (VCL). This bond marks a pioneering effort as it is the first climate bond issued by a medium-sized non-bank financial company in India. The funds raised from this bond will be used to finance projects in key sectors like electric vehicles, solar and wind energy, and waste management.
What Is a Climate Bond?
A climate bond is a type of fixed-income investment that raises funds for projects aimed at addressing climate change. The bond issued by VCL is certified by the Climate Bonds Initiative, an organization that ensures the funds are used for environmentally beneficial projects. This bond aims to improve access to climate finance for underserved businesses in India, such as micro, small, and medium-sized enterprises (MSMEs), mid-market companies, and individual retail clients.
Focus Areas for Investment
A significant portion of the investment—at least 30%—will be directed towards financing electric vehicles. This includes the development of charging stations and battery swapping stations, which are crucial for supporting the electric vehicle ecosystem. The bond will also provide green loans to help fund new or existing projects that offer environmental benefits.
ADB’s Vision for Climate Finance
Suzanne Gaboury, ADB’s Director General for Private Sector Operations, emphasized the importance of climate bonds in bridging the gap in climate finance in India. She stated, “Climate bonds can bridge the large market gap for climate finance in India while supporting the development of the capital market.” This partnership with VCL will help fund scalable and commercially viable renewable energy projects and assist in reducing pollution from road transport, which is responsible for up to 30% of urban air pollution in India.
Addressing Climate Change in India
India is facing severe challenges from climate change, with more than 80% of its population at risk of climate-related disasters. To combat these challenges, India has set ambitious climate targets, such as reducing carbon emissions by one billion tons by 2030 and achieving net-zero emissions by 2070. However, the country’s debt capital market is still in its infancy, with only 3.8% of domestic corporate bonds classified as green bonds.
Vivriti Capital’s Commitment
Vineet Sukumar, Founder and Managing Director of VCL, expressed gratitude for the ADB’s investment, saying, “We are honored to receive this significant investment from the Asian Development Bank, a testament to our unwavering commitment to sustainability and India’s ambitious climate goals.” He emphasized that this partnership will enable them to direct funds towards critical areas such as electric vehicles and renewable energy projects, driving sustainable economic growth and creating a positive ripple effect throughout the economy.
About Vivriti Capital Limited
Founded in 2017, VCL focuses on providing financing to mid-market companies, non-bank financial institutions, MSMEs, and retail clients. The company manages assets worth over INR 78 billion and has served more than 400 enterprise clients across 20 states in India. VCL also boasts over 1 million retail borrowers, sourced through various retail partners, and has collaborated with more than 975 MSMEs.
Conclusion
The ADB’s investment in VCL’s climate bond represents a crucial step towards addressing climate change in India. By providing necessary funding for sustainable projects, this initiative not only supports India’s ambitious climate goals but also fosters a more sustainable and resilient economy. With ongoing efforts to promote green finance, India is taking important strides towards a greener future.
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